Tobacco contract system biased—AHL

Tobacco auctioneer Auction Holdings Limited (AHL) has lodged a complaint to the Minister of Agriculture, Irrigation and Water Development Allan Chiyembekeza that the Integrated Production System (IPS) is discriminating against tobacco growers under the auction system.

Among others, AHL says growers who have opted for auction system are facing delays in getting their dues in time unlike their counterparts under contract farming.

IPS, a tobacco growing arrangement that enables buyers to establish direct contractual relationship with growers, has been at the center of controversy since it was officially approved by former president Joyce Banda in 2012.

The system allows the traditional auction system to only handle 20 percent of total volume of tobacco with the remaining 80 percent allocated towards contract farming.

“Farmers that have opted to sell their tobacco through auction system are being sort of discriminated as they are not allowed to sell everyday of the week,” said AHL group chief executive officer Evans Matabwa on Friday during a visit by Chiyembekeza at AHL premises at Kanengo in Lilongwe.

Matabwa, who did not mince words over IPS woes and repeatedly informed the minister about challenges facing growers in the work of system, said while contract farming is benefiting some growers, the same is hurting the other section of growers under auction system.

He said although growers under auction are given only two days to sell their tobacco per week, most of the volume is also being rejected, hence, worsening the situation.

Matabwa said IPS did not foresee cash-flow issues on the market as some growers take one to two weeks to get paid despite AHL having an obligation to pay the growers within 24 hours.

“Here is a four million dollar market being transacted on a daily basis, but you see that 20 percent of that is not yet received from merchants and we start running in red. Cash-flow issue was not foreseen,” he said.

Matabwa could not explicitly say whether IPS is inconveniencing the industry, but pushed the issue to growers saying they are the better judges on the implementation of the system.

“Certainly, as an operator of the market, we have our fair share of challenges, but we are working together as an industry to solve the challenges. The only biggest challenge which we have is that the farmers are not given equal choices.”

At some point, Chiyembekeza wondered whether AHL and the Tobacco Control Commission (TCC), the tobacco industry’s regulator, talk to each other in ironing out some persisting challenges facing the industry.

Matabwa, thereafter, invited the minister to discuss the issue further in the boardroom where journalists were barred.

After the meeting, the minister said he was not able to tell which system is the best between contract and auction, saying government will continue to use the two systems side by side and would decide which country will adopt wholesome.